- 20 Marks
FA – L1 – Q89 – Preparation of not-for-profit accounts
Question
The KNUST Social Club prepares its accounts annually on 31st December. The receipts and payments account for the year ended 31st December 20X8 was prepared by the treasurer as follows:
| GH¢ | GH¢ | ||
|---|---|---|---|
| Balance b/d | 7,000 | Caretaker’s wages | 18,000 |
| Subscriptions received | Heating and lighting | 4,000 | |
| for the year: 20X7 | 600 | Insurance | 1,000 |
| 20X8 | 13,500 | Bar payables | 22,000 |
| 20X9 | 1,100 | Dinner dance expenses | 1,000 |
| Dinner dance ticket sales | 1,800 | Equipment purchases | 12,000 |
| Bar takings | 55,000 | Bar staff wages | 16,000 |
| Donations | 2,500 | Savings account | 3,000 |
| Sale of equipment | 450 | Balance c/d | 18,350 |
| 81,350 | 81,350 |
The following additional information is available:
(i) The equipment sold during the year was valued in the books at GH¢600 as at 1st January 20X8. The club’s policy is to provide a full year’s depreciation in the year of purchase but none in the year of sale.
(ii) The savings account (short term) pays a fixed rate of interest of 5% per annum. An additional amount of GH¢400 was paid into the account on 1st July 20X8. There were no withdrawals made during the year. Interest due on 31st December 20X8 has not been received.
(iii) The remaining assets and liabilities of the club at the beginning and end of the year were:
| 1st January 20X8 | 31st December 20X8 | |
|---|---|---|
| GH¢ | GH¢ | |
| Clubhouse | 230,000 | 230,000 |
| Equipment | 26,000 | 25,200 |
| Bar inventory | 2,000 | 2,400 |
| Savings account | 2,000 | 2,400 |
| Insurance prepaid | 100 | 80 |
| Subscriptions owing | 180 | 160 |
| Subscriptions in advance | 800 | 300 |
| Bar payables | 700 | 1,000 |
| Bar staff wages owing | 2,400 | 1,400 |
| Cash at bank | 7,500 | 8,700 |
(iv) All subscriptions due for the year 20X7, but unpaid on 31st December 20X7, are considered to be irrecoverable debts.
(v) Bar staff wages are the only expense to be charged to the bar trading account.
Required:
(a) Prepare the bar trading account for the year ended 31st December 20X8.
(b) Prepare the income and expenditure account for the year ended 31st December 20X8.
(c) Prepare the statement of financial position as at 31st December 20X8.
Answer
(A)
KNUST Social Club
Bar trading account for the year ended 31 December 20X8
| GH¢ | GH¢ | |
|---|---|---|
| Bar sales | 55,000 | |
| Opening inventory | 2,000 | |
| Purchases (W1) | 22,300 | |
| 24,300 | ||
| Closing inventory | (2,400) | |
| Cost of sales | 21,900 | |
| Gross profit | 33,100 | |
| Bar staff wages | 16,000 | |
| Net profit | 17,100 |
Workings
W1 Purchases control account
| GH¢ | GH¢ | ||
|---|---|---|---|
| Bank | 22,000 | Balance b/d | 700 |
| Balance c/d | 1,000 | Purchases | 22,300 |
| 23,400 | 23,400 |
(B)
KNUST Social Club
Income and expenditure account for the year ended 31 December 20X8
| GH¢ | GH¢ | |
|---|---|---|
| Income | ||
| Profit from bar | 17,100 | |
| Subscriptions (W2) | 13,480 | |
| Profit from dinner dance (1,800 – 1,000) | 800 | |
| Donations | 2,500 | |
| Savings interest (5% × 2,000 + 5% × 400 × 1/2) | 110 | |
| 33,990 | ||
| Expenses | ||
| Caretakers wages | 18,000 | |
| Heating and lighting | 4,000 | |
| Insurance (W3) | 1,020 | |
| Irrecoverable debts (800 – 600) | 200 | |
| Loss on sale of equipment (600 – 450) | 150 | |
| Depreciation equipment (W4) | 3,160 | |
| 26,530 | ||
| Surplus of income over expenditure | 7,460 |
Workings
W2 Subscriptions account
| GH¢ | GH¢ | ||
|---|---|---|---|
| Balance b/d | 180 | Balance b/d | 800 |
| Income and expenditure | 13,480 | Bank | 600 |
| Balance c/d | 300 | 13,500 | |
| 1,100 | |||
| Irrecoverable debts | 200 | ||
| Balance c/d | 160 | ||
| 14,660 | 14,660 |
W3 Insurance account
| GH¢ | GH¢ | ||
|---|---|---|---|
| Balance b/d | 100 | Income and expenditure | 1,020 |
| Bank | 1,000 | Balance c/d | 80 |
| 1,100 | 1,100 |
W4 Depreciation – equipment
Equipment at 1 January 20X8 (net) 26,000
Equipment purchases 12,000
Value of equipment sold (600)
Equipment at 31 January 20X8 (net) 25,200
Depreciation 3,160
(C)
KNUST Social Club
Statement of financial position as at 31 December 20X8
| GH¢ | GH¢ | |
|---|---|---|
| Non-current assets | ||
| Clubhouse | 230,000 | |
| Equipment | 25,200 | |
| 255,200 | ||
| Current assets | ||
| Inventory | 2,400 | |
| Subscriptions owing | 160 | |
| Savings account | 2,400 | |
| Insurance prepaid | 80 | |
| Savings account interest | 110 | |
| Bank | 18,350 | |
| 23,500 | ||
| Total assets | 278,700 | |
| Current liabilities | ||
| Payables | 1,000 | |
| Subscriptions in advance | 300 | |
| Bar wages owing | 1,400 | |
| 2,700 | ||
| 276,000 | ||
| Accumulated fund | ||
| Balance b/d (W5) | 268,540 | |
| Surplus of income over expenditure | 7,460 | |
| 276,000 | ||
| Total accumulated fund and liabilities | 278,700 |
Workings
W5 Accumulated fund
Statement of affairs as at 31 December 20X7
| GH¢ | GH¢ | |
|---|---|---|
| Non-current assets | ||
| Clubhouse | 230,000 | |
| Equipment | 26,000 | |
| 256,000 | ||
| Current assets | ||
| Bar inventory | 2,000 | |
| Savings account | 2,000 | |
| Insurance prepaid | 100 | |
| Subscriptions owing | 180 | |
| Cash at bank | 7,500 | |
| 11,780 | ||
| Less current liabilities | ||
| Bar Payables | 700 | |
| Staff wages owing | 2,400 | |
| Subscriptions in advance | 800 | |
| 3,900 | ||
| Net current assets | 7,880 | |
| Financed by: | ||
| Accumulated fund (difference) | 268,540 |
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